BNY Mellon’s international wealth management business is focused on a few select geographies. Jeroen Kwist, head of international wealth management, suggests that this concentration has contributed to the bank’s success rather than restricted it. John Schaffer reports
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Jeroen Kwist took on the role of head of international wealth management at BNY Mellon in May 2016. However, this role has certainly not come out of the blue. Kwist joined BNY Mellon in 2007 and has been specifically involved in senior roles within the international wealth management business since 2011 – moving between offices in the UK, Hong Kong and the US. BNY Mellon serves the Canadian market in a separate unit in Toronto headed by the recently hired Margaret Franklin.
Now based in the London office, Kwist says that working in the UK has been “a little bit of a homecoming”, having been born in the Netherlands and schooled in the UK.
BNY Mellon’s international wealth management business is focused on a few select jurisdictions: Hong Kong, Dubai, the UK, the Cayman Islands, Canada and the US.
Kwist says the bank is looking to sustain its high client retention rate and concentrate on what it believes to be key wealth markets.
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By GlobalData
How has your role developed within BNY Mellon Wealth Management?
When senior management decided that they wanted to increase and enhance the focus on our international business, I came into the role so I was able to be key in defining what the strategy was and how we were going to grow our international business.
In that process, I then became responsible for our European business, and then also for our Asian business.
We’d had a long-standing Asian business which we were primarily serving from the US, we made the decision to re-enter that market in Asia, and I was responsible for that.
A couple of months ago, the bank appointed me head of the international business.
Are there plans to expand the wealth management operation into new markets?
We’re always looking to expand, but our plan would be to focus on the key international markets.
We look to expand our operations, and really that is to follow suit where our clients really need us to be.
How do you service your complex international client base?
We service international clients in two different ways.
As a US wealth manager, we take on clients that have a desire to be booked and serviced out of the US. There are a lot of reasons why that makes sense for clients.
Many people have children there, many people have strong ties to the US, and there are always jurisdictional considerations in terms of diversifications.
We currently have a strategy in place where we’re expanding the way we manage our international clients in the US. We have traditionally done that out of New York; we have also expanded into Miami where we focus primarily on our Latin American clients. Next we will be on focusing on the west coast to handle clients there.
We also have a lot of international clients that actually live in the US full-time. Some are US citizens that are married to somebody international. These are people who move to the US to build their own life.
The second part of it is we’re in local markets as well. We have an office in the UK which is more focused on family offices, we have recently launched an onshore operation out in Hong Kong, where we are looking to grow our business. Then we have a Cayman operation and we have some business development out in Dubai, and of course we have a Canadian unit as well.
How do you deal with the myriad challenges of running an international wealth management business and what differentiates the bank from its competitors?
If you look at the international wealth management market, there’s been a lot of consolidation. Some of the big global private banks that began to consolidate, they’ve done a lot of M&As – Julius Baer would be an example from that perspective.
I think part of that is because many of these private banks have had a lot of different locations that they’ve served and with the regulatory pressures out there, and a strong desire for scale in the market, I think we’ve seen some changes – so either some players are consolidating and others are changing focus. For example ourselves, we’re focussing heavily on the key global jurisdictions. We want to be in the main jurisdictions to service our clients.
The increased burden of regulation has driven up costs for private banks, how does BNY Mellon keep its costs low?
The business is doing extremely well and is poised for growth. Operational efficiency is always a measure and I think in the private banking industry, part of that is scale. The other part is how you target your clients. If you look at our business, we have an extremely high client retention rate of 97%.
If we serve our clients well, serve them in the right jurisdictions and make sure that they stay with us through generations – that really helps us maintain effective cost income ratios for our business.
Part of that is that we don’t look to be in every single market because it doesn’t make sense for our client base. As a result this generates operational efficiencies for us in the way that we service and retain our clients.
Has FATCA made wealth management a more challenging business for the bank?
It can be seen that for US banks, FATCA legislation has made things more difficult. I think you have to look a little bit from a higher level.
The first thing is you have FATCA now, but you also have the Common Reporting Standard (CRS) coming. The CRS is essentially the OECD countries that are doing the same thing as the US did with FATCA and mandating the sharing of information. The most important factor is that they’re different.
FATCA was there to collect all the information about US citizens; CRS is really collecting information about all the rest of the world. However, these are still two separate programmes.
What you’re finding is two things: There’s much more transparency and we think that’sa good thing from a global wealth management perspective. But you’re starting to see some clients actually preferring the US as a jurisdiction now, whereas two years ago, with only FATCA being in existence, they didn’t really think that way.
For foreign banks FATCA is a burden, because they have to start collecting information about a minority of their client base. But on the other hand, CRS is a similar burden.
CRS is the next wave of FATCA. You’re then going to have FATCA and CRS in place, and eventually, you can envision that FATCA and CRS could work together towards a global common information sharing standard with all jurisdictions exchanging information.
Surely implementing FATCA and CRS simultaneously will be a huge challenge for the business?
FATCA was a big initiative for our industry as a whole. As a wealth manager coming from a US bank – we have all that information. It was work to implement that but we were a component of doing those types of things in the best interest of our industry.
When we have to run two or even more of these programmes, it adds a lot of operational burden. But interfacing with a lot of different regulators is part of the new world of wealth management.
We spent a lot of time on the technology side making sure that we have systems that are able to satisfy the regulators’ requirements.
What we’re now finding is that a lot of the IT has to go towards regulatory reporting or similar projects. That then weighs into how your operations run, but it’s a reality of our business and it applies to all the banks across the world and we actually think that transparency is a good thing for the market.
What offerings do you have in place to attract and retain your top tier clients?
We have a very strong offering between the family office space and the traditional private banking space. We also have the ability to bring very strong institutional capabilities to both spaces. That’s a differentiator for us.
What BNY Mellon has done is with a very strong wealth management business, and also a strong institutional business, the way we interface with the family offices is that we actually straddle between both elements.
We have a team that takes our institutional strength capabilities, and translates them down into family offices and allows them to create flexible structures to service that segment.
We understand the family office client space from the strength of our wealth management business, and we have really strong institutional offerings which family offices tend to like, but we’re able to deliver that in a way that our clients understand and can leverage.
In that capacity, we really become an extension of a family office in how we provide our services.
For our family office clients, we’re not a pure institutional player and we’re not a pure private banking player – we sit in the middle and translate both capabilities into family offices, and that’s been a very successful model for us.
What emerging trends have you seen among your ultra-wealthy clients?
What we have seen is two things: Firstly, with globalisation and heavy growth out in Asia, you’re starting to see more focus on jurisdictional investments. So you’re starting to see family offices open either more local or
satellite offices, or even some family offices really wanting to move to Asia to be closer to investment opportunities.
Secondly, with a low-rate environment and also one that has persisted for a relatively long period of time, you are starting to see different affinities towards investment classes, and absolutely the alternatives space has been one.
However, when the interest-rate environment changes, you may start to see a reversion to more traditional investments.
What it comes down to for us is, we have a flexible investment management offering for our clients and we want to be able to keep the retention rates that are important to us to drive our business.
We have, as an institution, strong alternative investment solutions available. A lot of our family office clients take advantage of that. We have some alternative investment boutiques out of our asset management division, so we have a lot of flexibility with the size of our firm to be able to play into that, but we also have to make sure that we’re really watching and monitoring where these markets are going so that we can take advantage and be there for our clients.
How will the US election result affect your strategy?
With the US election, it’s also about who is in congress. The US political system has a lot of checks and balances, and I think that’s what will drive a lot of it – it’s not necessarily who becomes president. I think that’s one of the strengths of the US.
We look at the political platforms that each of the two candidates are running on, and what kind of impact it has on how we perceive the government is going to be run.
Based on that, [we ask] whether quantitative easing is going to continue. What’s going to happen to the rates? What is going to be the impact on foreign policy? Those are the types of things that we end up looking at and how it could affect our clients.
